Downsides of Corporate Political Connections: Evidence from Mass Shootings

This paper studies the negative impacts of corporate political connections on firm outcomes. Employing 20 years of mass shootings, I find that when mass shootings take place, companies that primarily support gun-rights politicians experience negative stock price reactions and worse operating performance. Depending on the number of fatalities in a mass shooting, one-week cumulative abnormal returns are about 1% to 2.5% lower for these firms. The operating performance of these firms also shows a substantial decline after mass shootings. The decline lasts for at least one year. After mass shootings, firms significantly reduce corporate political donations to gun-rights politicians. Further tests suggest that damage to corporate reputations rather than loss of corporate political connections to gun-rights politicians explain the findings.